Investors interested in Cosmetics stocks are likely familiar with European Wax Center, Inc. (EWCZ) and e.l.f. Beauty (ELF). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
European Wax Center, Inc. and e.l.f. Beauty are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. This means that EWCZ's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
EWCZ currently has a forward P/E ratio of 9.15, while ELF has a forward P/E of 34.60. We also note that EWCZ has a PEG ratio of 0.50. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ELF currently has a PEG ratio of 2.23.
Another notable valuation metric for EWCZ is its P/B ratio of 3.15. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, ELF has a P/B of 9.39.
These are just a few of the metrics contributing to EWCZ's Value grade of A and ELF's Value grade of F.
EWCZ has seen stronger estimate revision activity and sports more attractive valuation metrics than ELF, so it seems like value investors will conclude that EWCZ is the superior option right now.
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European Wax Center, Inc. (EWCZ): Free Stock Analysis Report e.l.f. Beauty (ELF): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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